Highlights on Nepal-China Transit Agreement Protocol

  • Nepal and China have agreed on the text of the protocol to the Transit and Transportation Agreement, which was signed two years ago, which will now enable Nepal to access Chinese sea and land ports ending the former’s dependence solely on India for goods and trade.
  • Prime Minister K P Oli had signed the Transit and Transporation Agreement with China in March 2016, following months-long Indian blockade at the southern border. The text of the protocol was finalized by Ravi Shanker Sainju (Nepal’s Joint Secretary at Ministry of Industry, Commerce and Supplies) and Wang Suiping (China’s Director General of Transport Department).
  • Till now almost all of Nepal’s trade passed through India’s Kolkata port, but that might change. Senior journalist Kanak Mani Dixit in a tweet referred to the bitter experience of the blockade in 2016 and the need to build roads to connect Nepal to the Chinese ports
  • While Nepal will focus on connectivity, the agreement allows many concessions to Nepal. The transit protocol does not specify paths, allowing Nepal to choose viable routes. Additionally, more ports and dry ports can be added without amending treaty; and trucks with Nepali number plates may go all the way to Shigatse (Xigatse) rail head to pick up goods.
  • The protocol is expected to be implemented in the next one month. Nepal will use six border points opened by the Chinese side to trade through these ports.
  • Apart from this forward movement on bilateral connectivity, Nepal is already a part of China’s Belt and Road Initiative (BRI). Nepal signed the Memorandum of Understanding on Cooperation under the Belt and Road Initiative on 12 May 2017 in Kathmandu to upgrade its vital infrastructures, enhance cross-border connectivity with China and enhance people-to-people relations under this initiative.
  • The major thrust of the BRI MoU according to the two sides is to promote “mutually” beneficial cooperation between Nepal and China in various fields such as economy, environment, technology and culture. The MoU aims at promoting cooperation on policy exchanges, trade connectivity, financial integration and connectivity of people.
  • Even as official sources played down the impact of the transit rights through China, Nepal Prime Minister K.P. Sharma Oli clinched in an agreement with his Chinese counterpart Li Keqiang in Beijing on Monday and other proposed agreements for rail connectivity, diplomat and academic Dr. S.D. Muni pointed out that the development represented “a challenge not just for India but for entire South Asia.” However, he cautioned, it should not trigger a panic reaction from India.
  • The agreements, however, will take some time before being implemented on the ground and political developments may impact the deals concluded. However, Dr. Muni pointed out that the implementation of the deals would depend on how far China was willing to invest in Nepal considering the economic and political risks associated with the deals. However, as of Monday, Nepal could not seal a vital fuel supply agreement with China which Nepali sources said would also come up for detailed discussion during the seven-day visit of Mr. Oli to China.
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